Negotiable Instruments

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CA Saba Naaz (Querist)
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21 October 2010 Can anyone please explain me the difference between Ambiguous Instrument and Fictitious Instrument....?
I am a bit confused..

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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21 October 2010 Ambiguous bill Section 17 of the Act states that an instrument which may be construed either as a promissory note or as a bill of exchange (Section 17) is considered as an ambiguous instrument.

In the following cases the instrument is treated as ambiguous instrument :

1. where the drawer and drawee are the same person.

2. where the drawee is a fictitious person

3. where the drawee is a person incapable of entering into contract.

The holder of such a bill is at liberty to treat the instrument as a bill or a promissory note. The holder shall decide it once for all. After having made his choice he cannot after wards fall back and say that it is the other kind of instrument.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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21 October 2010 Fictitious Bill

A Bill of Exchange in which the name of both the drawer and the payee are fictitious i.e. imaginary. Such a bill cannot be enforced by law but it is good in the hands of a holder in due course if it has been accepted by a genuine person. This is provided that he can show that the first Endorsement on the bill and the signature of the supposed drawer (being the holder as well) are in the same hand writing, and the acceptor is liable on the bill to him. In this connection section 42 of the Act states:

“An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relived from the liability to any holder in due course claiming under an Endorsement by the same hand as the drawer’s signature, and purporting to be made by the drawer.”

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